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AB-2045 Insurance.(2017-2018)

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Date Published: 07/03/2018 09:00 PM
AB2045:v96#DOCUMENT

Amended  IN  Senate  July 03, 2018
Amended  IN  Senate  June 14, 2018
Amended  IN  Assembly  March 20, 2018

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Assembly Bill No. 2045


Introduced by Committee on Insurance (Assembly Members Daly (Chair), Mayes (Vice Chair), Bigelow, Caballero, Calderon, Chu, Cooley, Cooper, Frazier, Grayson, and Harper)

February 06, 2018


An act to amend Sections 42, 109, 110, 122, 679.70, 1307, 1371, 1390, 1668, 1668.5, 1669, 1753, 4052, 10113.2, 10168.45, 10202, 10202.5, 10202.8, 10270, 10270.6, and 11401 of, and to repeal Section 12147 of, the Insurance Code, relating to insurance.


LEGISLATIVE COUNSEL'S DIGEST


AB 2045, as amended, Committee on Insurance. Insurance.

(1)Existing law prohibits a person from entering into, brokering, or soliciting, life settlement contracts, as defined, unless the person has been licensed by the Insurance Commissioner. Existing law requires an application for a license to be accompanied by a fee of $171 and also provides for an annual license renewal fee of $171.

This bill would increase both of those fees to $265.

(2)

(1Existing law governs annuities and, for those insurance contracts that provide cash surrender benefits, prescribes the cash surrender benefit available prior to maturity. Existing law authorizes an insurer to require a contract owner to complete an administrative form as part of the surrender process and requires the insurer to provide the administrative form to the contract owner within two business days of the request.
This bill would instead require the insurer to send or mail the administrative form to the contract owner within two business days of the request.

(3)Existing law provides that for purposes of specified group life insurance policies, the term “employee” may include, among others, the officers, managers, and employees of subsidiary or affiliated corporations, and the individual proprietors, partners, and employees of affiliated individuals and firms, as specified. Existing law requires a group life insurance policy to contain a certificate setting forth, among other things, specific information regarding the ability of the employee to retain insurance upon termination, to obtain additional insurance, and to receive benefits upon death.

This bill would also include within the definition of employees for those purposes classes of former employees, including retired employees, and would require these employees to also receive a certificate with those provisions.

(4)

(2) Existing law exempts from requirements for providing insurance set forth in the Insurance Code firefighters’, police officers’, and peace officers’ benefit and relief associations that comply with specified criteria, including, among other things, a requirement that the membership consist solely of peace officers, members of police or fire departments, and emergency medical personnel employed by fire departments, as specified. Existing law prohibits these associations from operating or doing business in the state without a certificate of authority.
This bill would require an association to renew its certificate of authority on or before July 1, 2019, and every 5 years thereafter. The bill would authorize the Insurance Commissioner to revoke an association’s certificate of authority under specified circumstances after mailing written notice to the association.

(5)

(3) Existing law generally regulates motor clubs and prohibits a person from rendering motor club service in this state without first obtaining from the Insurance Commissioner a certificate of authority to act as a motor club.
This bill would delete the definition of bail bond services in provisions relating to motor clubs.

(6)

(4) Existing law generally provides for the regulation of insurers by the Department of Insurance pursuant to provisions set forth in the Insurance Code.
This bill would make various technical, nonsubstantive amendments to provisions relating to insurance to, among other things, provide for gender neutral language and updated cross-references.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Section 42 of the Insurance Code is amended to read:

42.
 The designation of insurance coverage as “group” in any code or law of this state other than this code does not authorize its representation as a group coverage or as a group policy, certificate, or contract by any person licensed or certificated by the commissioner unless the policy providing the coverage is defined as group insurance by a specific provision of this code or of the laws of the state in which the policy, certificate, or contract is issued. This section shall apply only to life, disability, and workers’ compensation insurance.

SEC. 2.

 Section 109 of the Insurance Code is amended to read:

109.
 Workers’ compensation insurance includes insurance against loss from liability imposed by law upon employers to compensate employees and their dependents for injury sustained by the employees arising out of and in the course of the employment, irrespective of negligence or of the fault of either party.

SEC. 3.

 Section 110 of the Insurance Code is amended to read:

110.
 Common carrier liability insurance includes insurance against loss resulting from liability of a common carrier for accident or injury, fatal or nonfatal, to any person but does not include liability or workers’ compensation insurance.

SEC. 4.

 Section 122 of the Insurance Code is amended to read:

122.
 (a) An insurer admitted for all the classes of insurance defined in Sections 102, 107, 108, 112, and 120 is authorized, in addition to the underwriting powers granted by such classes, to include any and all insurance described in paragraph (b) in a policy which contains fire coverage written on a form complying with either Section 2070 or 2071 and which provides insurance covering only noncommercial risks and covering either residence properties (not more extensive than a four-family dwelling) and appurtenances, or the contents thereof other than merchandise, or both.
(b) Such insurance is any or all insurance against all risks of physical loss of, damage to, or personal liability (except workers’ compensation) for injury to person or damage to property incident to, any or all of the following:
(1) The location described and property covered by the fire insurance policy as described in subdivision (a),
(2) Personal effects,
(3) Boats not over 16 feet in length (including furnishings, equipment, outboard motors, and trailers); provided the physical loss or damage coverage does not exceed five hundred dollars ($500),
(4) Personal property intended primarily for residential or recreational use, (excluding boats except as provided above),
(5) Farm implements or self-propelled vehicles, excluding automobiles and aircraft, and,
(6) Horses, including accouterments and vehicles or implements to be drawn thereby.

SEC. 5.

 Section 679.70 of the Insurance Code is amended to read:

679.70.
 This chapter shall apply to policies of insurance, other than automobile insurance and workers’ compensation insurance, on risks located or resident in this state which are issued and take effect or which are renewed after the effective date of this chapter and which insure any of the following contingencies:
(a) Loss of or damage to real property which is used predominantly for residential purposes.
(b) Loss of or damage to personal property in which natural persons resident in specifically described real property of the kind described in subdivision (a) have an insurable interest.
(c) Legal liability of a natural person or persons for loss of, damage to, or injury to, persons or property.

SEC. 6.

 Section 1307 of the Insurance Code is amended to read:

1307.
 The power of attorney and contracts made thereunder may:
(a) Provide for the right of substitution of attorney and revocation of the contract or power.
(b) Impose such restrictions upon the exercise of the power as are agreed upon by the subscribers.
(c) Provide for and limit the maximum amount to be paid by subscribers, except that contracts of exchanges writing either liability or workers’ compensation insurance shall be subject to the provisions of Article 6 of this chapter.
(d) Provide for the exercise of any right reserved to the subscribers directly or through a board or other body.

SEC. 7.

 Section 1371 of the Insurance Code is amended to read:

1371.
 If an exchange does either liability or workers’ compensation insurance, it shall at all times maintain assets in a sum sufficient to discharge all liabilities and to provide a surplus over all liabilities of one hundred thousand dollars ($100,000).
An exchange subject to the provisions of this section is also subject to the provisions of Sections 1370.2, 1370.4, and 1370.8.

SEC. 8.

 Section 1390 of the Insurance Code is amended to read:

1390.
 The provisions of this article shall apply only to exchanges writing liability, common carrier liability, or workers’ compensation insurance, except that any exchange may apply for and receive the certificate provided for by Section 1401.

SEC. 9.

 Section 1668 of the Insurance Code is amended to read:

1668.
 The commissioner may deny an application for any license issued pursuant to this chapter if:
(a) The applicant is not properly qualified to perform the duties of a person holding the license applied for;
(b) The granting of the license will be against public interest;
(c) The applicant does not intend actively and in good faith to carry on as a business with the general public the transactions which would be permitted by the issuance of the license applied for;
(d) The applicant is not of good business reputation;
(e) The applicant is lacking in integrity;
(f) The applicant has been refused a professional, occupational, or vocational license or had such a license suspended or revoked by any licensing authority for reasons that should preclude the granting of the license applied for;
(g) The applicant seeks the license for the purpose of avoiding or preventing the operation or enforcement of the insurance laws of this state;
(h) The applicant has knowingly or willfully made a misstatement in an application to the commissioner for a license, or in a document filed in support of such an application, or has made a false statement in testimony given under oath before the commissioner or any other person acting in his or her stead;
(i) The applicant has previously engaged in a fraudulent practice or act or has conducted any business in a dishonest manner;
(j) The applicant has shown incompetency or untrustworthiness in the conduct of any business, or has by commission of a wrongful act or practice in the course of any business exposed the public or those dealing with him or her to the danger of loss;
(k) The applicant has knowingly misrepresented the terms or effect of an insurance policy or contract;
(l) The applicant has failed to perform a duty expressly enjoined upon him or her by a provision of this code or has committed an act expressly forbidden by such a provision;
(m) The applicant has been convicted of:
(1) A felony;
(2) A misdemeanor denounced by this code or other laws regulating insurance; or
(3) A public offense having as one of its necessary elements a fraudulent act or an act of dishonesty in acceptance, custody, or payment of money or property;
(n) The applicant has aided or abetted any person in an act or omission which would constitute grounds for the suspension, revocation, or refusal of a license or certificate issued under this code to the person aided or abetted;
(o) The applicant has permitted any person in his or her employ to violate any provision of this code; or
(p) The applicant has violated any provision of law relating to conduct of business which could lawfully be done only under authority conferred by such license.
(q) The applicant has submitted to the commissioner a false or fraudulent certificate pursuant to subdivision (d) of Section 1749.5.
A judgment, plea, or verdict of guilty, or a plea of nolo contendere is deemed to be a conviction within the meaning of this section.

SEC. 10.

 Section 1668.5 of the Insurance Code is amended to read:

1668.5.
 (a) The commissioner may deny an application for any license issued pursuant to this chapter, and may suspend or revoke the permanent license of any organization licensed pursuant to this chapter as authorized by Section 1738, if the applicant or holder of the permanent license is an organization and a controlling person of the organization is any of the following:
(1) The controlling person has previously engaged in a fraudulent practice or act or has conducted any business in a dishonest manner.
(2) The controlling person has shown incompetency or untrustworthiness in the conduct of any business, or has by commission of a wrongful act or practice in the course of any business exposed the public or those dealing with him or her to the danger of loss.
(3) The controlling person has knowingly misrepresented the terms or effect of an insurance policy or contract.
(4) The controlling person has failed to perform a duty expressly enjoined upon him or her by a provision of this code or has committed an act expressly forbidden by a provision of this code.
(5) The controlling person has been convicted of any of the following:
(A) A felony.
(B) A misdemeanor denounced by this code or other laws regulating insurance.
(C) A public offense having as one of its necessary elements a fraudulent act or an act of dishonesty in acceptance, custody, or payment of money or property.
A judgment, plea, or verdict of guilty, or a plea of nolo contendere is deemed to be a conviction within the meaning of this section.
(6) The controlling person has aided or abetted any person in an act or omission that would constitute grounds for the suspension, revocation, or refusal of a license or certificate issued under this code to the person aided or abetted.
(7) The controlling person has permitted any person in his or her employ to violate any provision of this code.
(8) The controlling person has violated any provision of law relating to conduct of business that could lawfully be done only under authority conferred by a license under this chapter.
(b) As used in this section, “controlling person” means a person who possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the organization, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, including, but not limited to, power that is the result of an official position with or corporate office held by the person. Control shall be presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing, more than 10 percent of the voting securities of the organization. This presumption may be rebutted by a showing that control does not exist in fact. The commissioner may, after furnishing all persons in interest notice and opportunity to be heard, determine that control exists in fact, notwithstanding the absence of a presumption to that effect.

SEC. 11.

 Section 1669 of the Insurance Code is amended to read:

1669.
 The commissioner may, without hearing, deny an application if the applicant has done one or more of the following:
(a) (1) Been convicted of a felony.
(2) Been convicted of a misdemeanor denounced by this code or by other laws regulating insurance.
(3) A judgment, plea, or verdict of guilty, or a plea of nolo contendere is deemed to be a conviction within the meaning of this subdivision.
(b) Had a previous application for a professional, occupational, or vocational license denied for cause by any licensing authority, within five years of the date of the filing of the application to be acted upon, on grounds that should preclude the granting of a license by the commissioner under this chapter.
(c) Had a previously issued professional, occupational, or vocational license suspended or revoked for cause by any licensing authority, within five years of the date of the filing of the application to be acted upon, on grounds that should preclude the granting of a license by the commissioner under this chapter.
In the event the commissioner issues an order based on a plea that does not at any time result in a judgment of conviction, the commissioner shall vacate the order upon petition by the applicant.

SEC. 12.

 Section 1753 of the Insurance Code is amended to read:

1753.
 As used in this article, the following terms have the following meanings:
(a) “Limited lines travel insurance agent” means an insurer designee that is licensed to transact travel insurance, as defined in subdivision (b).
(b) “Transact” means, for the purposes of this article, the following activities when engaged in by a travel retailer:
(1) Offering and disseminating information to a prospective or current policyholder on behalf of a limited lines travel insurance agent, including brochures, buyer guides, descriptions of coverage, and price.
(2) Referring specific questions regarding coverage features and benefits from a prospective or current policyholder to a limited lines travel insurance agent.
(3) Disseminating and processing applications for coverage, coverage selection forms, or other similar forms in response to a request from a prospective or current policyholder.
(4) Collecting premiums from a prospective or current policyholder on behalf of a limited lines travel insurance agent.
(5) Receiving and recording information from a policyholder to share with a limited lines travel insurance agent.
(c) (1) “Travel insurance” means insurance coverage for personal risks incidental to planned travel, including one or more of the following:
(A) Interruption or cancellation of a trip or event.
(B) Loss of baggage or personal effects.
(C) Damages to accommodations or rental vehicles.
(D) Sickness, accident, disability, or death occurring during travel.
(2) Travel insurance does not include major medical plans, which provide comprehensive medical protection for travelers with trips lasting six months or longer, including, for example, those working overseas as an expatriate or military personnel being deployed.
(3) Travel insurance does not include damage waiver contracts, as defined in subdivision (g) of Section 1939.01 of the Civil Code. The phrase “damage waiver” or “collision damage waiver” cannot be used to describe travel insurance coverage, but the insurance contract may otherwise refer to “damage waiver” or “collision damage waiver” provided by a rental company, as defined in subdivision (a) of Section 1939.01 of the Civil Code.
(d) “Travel retailer” means a business organization that makes, arranges, or offers travel services and may offer and disseminate travel insurance as a service to its customers on behalf of and under the direction of a limited lines travel insurance agent.

SEC. 13.

 Section 4052 of the Insurance Code is amended to read:

4052.
 The payment of any such dividends on a workers’ compensation policy shall be subject to the provisions of Section 11738 and for that purpose a mutual policy shall be considered to be a participating policy.

SEC. 14.Section 10113.2 of the Insurance Code is amended to read:
10113.2.

(a)This section applies to any person entering into, brokering, or soliciting life settlements pursuant to this section and Sections 10113.1 and 10113.3.

(b)(1)Except as provided in subparagraph (B) or (D), a person may not enter into, broker, or solicit life settlements pursuant to Section 10113.1 unless that person has been licensed by the commissioner under this section. The person shall file an application for a license in the form prescribed by the commissioner, and the application shall be accompanied by a fee of two hundred sixty-five dollars ($265). The annual license renewal fee shall be two hundred sixty-five dollars ($265). The applicant shall provide any information the commissioner may require. The commissioner may issue a license, or deny the application if, in his or her discretion, it is determined that it is contrary to the interests of the public to issue a license to the applicant. The reasons for a denial shall be set forth in writing.

(A)An individual acting as a broker under this section shall complete at least 15 hours of continuing education related to life settlements and life settlement transactions, as required and approved by the commissioner, prior to operating as a broker. This requirement shall not apply to a life insurance producer who qualifies under subparagraph (D).

(B)A person licensed as an attorney, certified public accountant, or financial planner accredited by a nationally recognized accreditation agency, who is retained to represent the owner, and whose compensation is not paid directly or indirectly by the provider or purchaser, may negotiate a life settlement contract on behalf of the owner without having to obtain a license as a broker.

(C)A person licensed to act as a viatical settlement broker or provider as of December 31, 2009, shall be deemed qualified for licensure as a life settlement broker or provider, and shall be subject to all the provisions of this article as if the person were originally licensed as a life settlement broker or provider.

(D)(i)A life insurance producer who has been duly licensed as a life agent for at least one year or as a licensed nonresident producer in this state for one year shall be deemed to meet the licensing requirements of this section and shall be permitted to operate as a broker.

(ii)Not later than 10 days from the first day of operating as a broker, the life insurance producer shall notify the commissioner that he or she is acting as a broker, on a form prescribed by the commissioner, and shall pay a fee of eighty-five dollars ($85).

(iii)The fee shall be paid by the life insurance producer for each license term the producer intends to operate as a broker. The fee shall be calculated pursuant to Section 1750. The notification to the commissioner shall include an acknowledgment by the life insurance producer that he or she will operate as a broker in accordance with this act.

(iv)The insurer that issued the policy that is the subject of a life settlement contract shall not be responsible for any act or omission of a broker or provider arising out of, or in connection with, the life settlement transaction, unless the insurer receives compensation for the replacement of the life settlement contract for the provider or broker.

(E)The commissioner shall review the examination for the licensing of life insurance agents and may recommend any changes to the examination to the department’s curriculum committee in order to carry out the purposes of this section and Sections 10113.1 and 10113.3.

(2)Whenever it appears to the commissioner that it is contrary to the interests of the public for a person licensed pursuant to this section to continue to transact life settlements business, he or she shall issue a notice to the licensee stating the reasons therefor. If, after a hearing, the commissioner concludes that it is contrary to the interests of the public for the licensee to continue to transact life settlements business, he or she may revoke the person’s license, or issue an order suspending the license for a period as determined by the commissioner. Any hearing conducted pursuant to this paragraph shall be in accordance with Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code, except that the hearing may be conducted by administrative law judges chosen pursuant to Section 11502 or appointed by the commissioner, and the commissioner shall have the powers granted therein.

(3)Each licensee shall owe and pay in advance to the commissioner an annual renewal fee in an amount to be determined by the commissioner pursuant to paragraph (1) of subdivision (b). This fee shall be for each license year, as defined by Section 1629.

(4)Any licensee that intends to discontinue transacting life settlements in this state shall so notify the commissioner, and shall surrender its license.

(c)A life settlements licensee shall file with the department a copy of all life settlement forms used in this state. A licensee may not use any life settlement form in this state unless it has been provided in advance to the commissioner. The commissioner may disapprove a life settlement form if, in his or her discretion, the form, or provisions contained therein, are contrary to the interests of the public, or otherwise misleading or unfair to the consumer. In the case of disapproval, the licensee may, within 15 days of notice of the disapproval, request a hearing before the commissioner or his or her designee, and the hearing shall be held within 30 days of the request.

(d)Life settlements licensees shall be required to provide any applicant for a life settlement contract, at the time of application for the life settlement contract, all of the following disclosures in writing and signed by the owner, in at least 12-point type:

(1)That there are possible alternatives to life settlements, including, but not limited to, accelerated benefits options that may be offered by the life insurer.

(2)The fact that some or all of the proceeds of a life settlement may be taxable and that assistance should be sought from a professional tax adviser.

(3)Consequences for interruption of public assistance as provided by information provided by the State Department of Health Care Services and the State Department of Social Services under Section 11022 of the Welfare and Institutions Code.

(4)That the proceeds from a life settlement could be subject to the claims of creditors.

(5)That entering into a life settlement contract may cause other rights or benefits, including conversion rights and waiver of premium benefits that may exist under the policy or certificate of a group policy to be forfeited by the owner and that assistance should be sought from a professional financial adviser.

(6)That a change in ownership of the settled policy could limit the insured’s ability to purchase insurance in the future on the insured’s life because there is a limit to how much coverage insurers will issue on one life.

(7)That the owner has a right to rescind a life settlement contract within 30 days of the date it is executed by all parties and the owner has received all required disclosures, or 15 days from receipt by the owner of the proceeds of the settlement, whichever is sooner. Rescission, if exercised by the owner, is effective only if both notice of rescission is given and the owner repays all proceeds and any premiums, loans, and loan interest paid on account of the provider within the rescission period. If the insured dies during the rescission period, the contract shall be deemed to have been rescinded subject to repayment by the owner or the owner’s estate of all proceeds and any premiums, loans, and loan interest to the provider.

(8)That proceeds will be sent to the owner within three business days after the provider has received the insurer or group administrator’s acknowledgment that ownership of the policy or the interest in the certificate has been transferred and the beneficiary has been designated in accordance with the terms of the life settlement contract.

(9)The date by which the funds will be available to the owner and the transmitter of the funds.

(10)The disclosure document shall include the following language:


“All medical, financial, or personal information solicited or obtained by a provider or broker about an insured, including the insured’s identity or the identity of family members, a spouse, or a significant other may be disclosed as necessary to effect the life settlement contract between the owner and provider. If you are asked to provide this information, you will be asked to consent to the disclosure. The information may be provided to someone who buys the policy or provides funds for the purchase. You may be asked to renew your permission to share information every two years.”


(11)That the insured may be contacted by either the provider or the broker or its authorized representative for the purpose of determining the insured’s health status or to verify the insured’s address. This contact is limited to once every three months if the insured has a life expectancy of more than one year, and no more than once per month if the insured has a life expectancy of one year or less.

(12)Any affiliations or contractual relations between the provider and the broker, and the affiliation, if any, between the provider and the issuer of the policy to be settled.

(13)That a broker represents exclusively the owner, and not the insurer or the provider or any other person, and owes a fiduciary duty to the owner, including a duty to act according to the owner’s instructions and in the best interest of the owner.

(14)The name, business address, and telephone number of the broker.

(e)Prior to the execution of the life settlement contract by all parties, the life settlement provider entering into a life settlement contract with the owner shall provide, in a document signed by the owner, the gross purchase price the life settlement provider is paying for the policy, the amount of the purchase price to be paid to the owner, the amount of the purchase price to be paid to the owner’s life settlement broker, and the name, business address, and telephone number of the life settlement broker. For purposes of this section, “gross purchase price” means the total amount or value paid by the provider for the purchase of one or more life insurance policies, including commissions and fees.

(f)The broker shall provide the owner and the insured with at least all of the following disclosures in writing prior to the signing of the life settlement contract by all parties. The disclosures shall be clearly displayed in the life settlement contract or in a separate document signed by the owner:

(1)The name, business address, and telephone number of the broker.

(2)A full, complete, and accurate description of all of the offers, counteroffers, acceptances, and rejections relating to the proposed life settlement contract.

(3)A disclosure of any affiliations or contractual arrangements between the broker and any person making an offer in connection with the proposed life settlement contract.

(4)All estimates of the life expectancy of the insured that are obtained by the licensee in connection with the life settlement, unless that disclosure would violate any California or federal privacy laws.

(5)The commissioner may consider any failure to provide the disclosures or rights described in this section as a basis for suspending or revoking a broker’s or provider’s license pursuant to paragraph (2) of subdivision (b).

(g)All medical information solicited or obtained by any person soliciting or entering into a life settlement is subject to Article 6.6 (commencing with Section 791) of Chapter 1 of Part 2 of Division 1, concerning confidentiality of medical information.

(h)Except as otherwise allowed or required by law, a provider, broker, insurance company, insurance producer, information bureau, rating agency, or company, or any other person with actual knowledge of an insured’s identity shall not disclose the identity of an insured or information that there is a reasonable basis to believe that could be used to identify the insured or the insured’s financial or medical information to any other person unless the disclosure is one of the following:

(1)It is necessary to effect a life settlement contract between the owner and a provider and the owner and insured have provided prior written consent to the disclosure.

(2)It is necessary to effectuate the sale of life settlement contracts, or interests therein, as investments, provided the sale is conducted in accordance with applicable state and federal securities law and provided further that the owner and the insured have both provided prior written consent to the disclosure.

(3)It is provided in response to an investigation or examination by the commissioner or any other governmental officer or agency or any other provision of law.

(4)It is a term or condition to the transfer of a policy by one provider to another provider, in which case the receiving provider shall be required to comply with the confidentiality requirements of Article 6.6 (commencing with Section 791) of Chapter 1 of Part 2 of Division 1.

(5)It is necessary to allow the provider or broker or their authorized representatives to make contacts for the purpose of determining health status. For the purposes of this section, the term “authorized representative” shall not include any person who has or may have any financial interest in the settlement contract other than a provider, licensed broker; further, a provider or broker shall require its authorized representative to agree in writing to adhere to the privacy provisions of this act.

(6)It is required to purchase stop loss coverage.

(i)In addition to other questions an insurance carrier may lawfully pose to a life insurance applicant, insurance carriers may inquire in the application for insurance whether the proposed owner intends to pay premiums with the assistance of financing from a lender that will use the policy as collateral to support the financing.

(1)If the premium finance loan provides funds that can be used for a purpose other than paying for the premiums, costs, and expenses associated with obtaining and maintaining the life insurance policy and loan, the application may be rejected as a prohibited practice under this act.

(2)If the financing does not violate paragraph (1), the existence of premium financing may not be the sole criterion employed by an insurer in a decision whether to reject an application for life insurance. The insurance carrier may make disclosures to the applicant, either on the application or an amendment to the application to be completed no later than the delivery of the policy, including, but not limited to, the following:


“If you have entered into a loan arrangement where the policy is used as collateral, and the policy changes ownership at some point in the future in satisfaction of the loan, the following may be true:

“(A)A change of ownership could lead to a stranger owning an interest in the insured’s life.

“(B)A change of ownership could in the future limit your ability to purchase insurance on the insured’s life because there is a limit to how much coverage insurers will issue on a life.

“(C)You should consult a professional adviser since a change in ownership in satisfaction of the loan may result in tax consequences to the owner, depending on the structure of the loan.”


(3)In addition to the disclosures in paragraph (2), the insurance carrier may require the following certifications from the applicant or the insured:


“(A)I have not entered into any agreement or arrangement under which I have agreed to make a future sale of this life insurance policy.

“(B)My loan arrangement for this policy provides funds sufficient to pay for some or all of the premiums, costs, and expenses associated with obtaining and maintaining my life insurance policy, but I have not entered into any agreement by which I am to receive consideration in exchange for procuring this policy.

“(C)The borrower has an insurable interest in the insured.”


(j)Life insurers shall provide individual life insurance policyholders with a statement informing them that if they are considering making changes in the status of their policy, they should consult with a licensed insurance or financial adviser. The statement may accompany or be included in notices or mailings otherwise provided to the policyholders.

(k)The commissioner may, whenever he or she deems it reasonably necessary to protect the interests of the public, examine the business and affairs of any licensee or applicant for a license. The commissioner shall have the authority to order any licensee or applicant to produce any records, books, files, or other information as is reasonably necessary to ascertain whether or not the licensee or applicant is acting or has acted in violation of the law or otherwise contrary to the interests of the public. The expenses incurred in conducting any examination shall be paid by the licensee or applicant.

(l)The commissioner may investigate the conduct of any licensee, its officers, employees, agents, or any other person involved in the business of the licensee, or any applicant for a license, whenever the commissioner has reason to believe that the licensee or applicant for a license may have acted, or may be acting, in violation of the law, or otherwise contrary to the interests of the public. The commissioner may initiate an investigation on his or her own, or upon a complaint filed by any other person.

(m)The commissioner may issue orders to licensees whenever he or she determines that it is reasonably necessary to ensure or obtain compliance with this section, or Section 10113.3. This authority includes, but is not limited to, orders directing a licensee to cease and desist in any practice that is in violation of this section, or Section 10113.3, or otherwise contrary to the interests of the public. Any licensee to which an order pursuant to this subdivision is issued may, within 15 days of receipt of that order, request a hearing at which the licensee may challenge the order.

(n)The commissioner may, after notice and a hearing at which it is determined that a licensee has violated this section or Section 10113.3 or any order issued pursuant to this section, order the licensee to pay a monetary penalty of up to ten thousand dollars ($10,000), which may be recovered in a civil action. Any hearing conducted pursuant to this subdivision shall be in accordance with Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code, except that the hearing may be conducted by administrative law judges chosen pursuant to Section 11502 or appointed by the commissioner, and the commissioner shall have the powers granted therein.

(o)Each licensed provider shall file with the commissioner on or before March 1 of each year an annual statement in the form prescribed by the commissioner. The information that the commissioner may require in the annual statement shall include, but not be limited to, the total number, aggregate face amount, and life settlement proceeds of policies settled during the immediately preceding calendar year, together with a breakdown of the information by policy issue year. The annual statement shall also include the names of the insurance companies whose policies have been settled and the brokers that have settled those policies, and that information shall be received in confidence within the meaning of subdivision (d) of Section 6254 of the Government Code and exempt from disclosure pursuant to the Public Records Act (Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1 of the Government Code). The annual statement shall not include individual transaction data regarding the business of life settlements or information that there is a reasonable basis to believe could be used to identify the owner or the insured.

(p)A person who is not a resident of California may not receive or maintain a license unless a written designation of an agent for service of process is filed and maintained with the commissioner. The provisions of Article 3 (commencing with Section 1600) of Chapter 4 of Part 2 of Division 1 shall apply to life settlements licensees as if they were foreign insurers, their license a certificate of authority, and the life settlements a policy, and the commissioner may modify the agreement set forth in Section 1604 accordingly.

(q)A person licensed pursuant to this section shall not engage in any false or misleading advertising, solicitation, or practice. In no case shall a broker or provider, directly or indirectly, market, advertise, solicit, or otherwise promote the purchase of a new policy for the sole purpose of or with a primary emphasis on settling the policy or use the words “free,” “no cost,” or words of similar import in the marketing, advertising, soliciting, or otherwise promoting of the purchase of a policy. The provisions of Article 6 (commencing with Section 780) and Article 6.5 (commencing with Section 790) of Chapter 1 of Part 2 of Division 1 shall apply to life settlements licensees as if they were insurers, their license a certificate of authority or producer’s license, and the life settlements a policy, and the commissioner shall liberally construe these provisions so as to protect the interests of the public.

(r)Any person who enters into a life settlement with a life settlements licensee shall have the absolute right to rescind the settlement within 30 days of the date it is executed by all parties and the owner has received all required disclosures, or 15 days from receipt by the owner of the proceeds of the settlement, whichever is sooner, and any waiver or settlement language contrary to this subdivision shall be void. Rescission, if exercised by the owner, is effective only if both notice of rescission is given and the owner repays all proceeds and any premiums, loans, and loan interest paid on account of the provider within the rescission period. If the insured dies during the rescission period, the contract shall be deemed to have been rescinded subject to repayment by the owner or the owner’s estate of all proceeds and any premiums, loans, and loan interest to the provider.

(s)Records of all consummated transactions and life settlement contracts shall be maintained by the provider for three years after the death of the insured and shall be available to the commissioner for inspection during reasonable business hours.

(t)A violation of this section is a misdemeanor.

SEC. 15.SEC. 14.

 Section 10168.45 of the Insurance Code is amended to read:

10168.45.
 (a) (1) For an individual annuity contract subject to this article that is surrendered by the contract owner, the insurer shall return to the owner all moneys due in relation to that contract as expeditiously as possible but not later than 45 days from the date the surrender is effective as provided in subdivision (b).
(2) An insurer may defer payment of cash surrender value for up to six months if the approval described in subdivision (b) of Section 10168.1 has been received by the insurer.
(b) (1) (A) A surrender of a contract is effective on the date the request is received if the request is made to the insurer, or servicing agent authorized by the insurer in writing to receive requests for surrender on the insurer’s behalf, and contains the elements specified by the insurer in the contract.
(B) The effective date of the surrender of a contract may be up to 45 days after the request for surrender is received if it is permitted by the contract and requested by the contract owner.
(2) The insurer may require the request for surrender to be in writing.
(3) The elements the insurer may require as part of the request for surrender are limited to the following:
(A) A statement that makes it clear that the contract owner intends to surrender, in whole or in part, the contract in question.
(B) The contract number of the contract to be surrendered.
(C) The name, address, and telephone number of the contract owner on the contract to be surrendered.
(D) A clear method of delivery and payee instructions for payment of the surrender value.
(E) For partial surrender, the withdrawal amount, including requested beginning date, frequency, and maximum annual withdrawal amount, and instructions on subaccount withdrawals.
(F) Instructions for tax withholding.
(G) The signature of the owner of the contract, which may be either a wet signature or an electronic signature at the insurer’s discretion, and if required by the contract or by a legally binding document that the insurer has actual notice of, the signature of a collateral assignee, irrevocable beneficiary, or other person having an interest in the contract through the legally binding document.
(H) Either the contract itself, or, in lieu of the contract, a statement that the contract has been lost or destroyed.
(4) The insurer may require the contract owner to complete an administrative form as part of the surrender process. The insurer’s administrative form may only request information required to complete the surrender transaction, as set forth in paragraph (3). An administrative form shall be sent or mailed to the contract owner within two business days of the request, and shall be available for the contract owner to access on the insurer’s Internet Web site if the contract owner accesses his or her account information through the insurer’s Internet Web site. The insurer’s requirement to complete an administrative form shall not further the effective date of the surrender or extend the 45-day period in which the surrender is required to be processed.
(A) The administrative form shall be designed to provide the insurer with the information needed to complete the surrender transaction consistent with the contract owner’s request.
(B) If the insurer requires an administrative form and the contract owner completes and submits that form within 14 days of the surrender request, the insurer shall return all moneys due as expeditiously as possible but not later than 30 days from the effective date of the surrender.
(c) When the contract owner requests information about surrendering a contract from the insurer or servicing agent, the insurer or servicing agent shall provide, upon request, as expeditiously as possible, a written notice setting forth either the requirements of this section or the insurer’s requirements.
(d) A contract subject to this section shall do either of the following:
(1) Include language, which may be included by endorsement, setting forth the permitted requirements for surrender described in this section. Alternatively, if the insurer requires only some of the elements permitted in paragraph (3) of subdivision (b) for a surrender request, the contract language may exclude any of the elements in paragraph (3) of subdivision (b) that the insurer does not require to process the surrender.
(2) Be accompanied by a notice setting forth the permitted requirements for a surrender described in this section. Alternatively, if the insurer requires only some of the elements permitted in paragraph (3) of subdivision (b) for a surrender request, the notice may exclude any of the elements in paragraph (3) of subdivision (b) that the insurer does not require to process the surrender.
(e) (1) For a written request and for purposes of this section, “received” means the first day that the written notice is delivered to the address of the insurer or servicing agent authorized by the insurer in writing to receive requests for surrender on the insurer’s behalf.
(2) (A) An insurer or servicing agent shall maintain a procedure for ensuring that requests for surrender are logged or stamped on the date received and not on a later date due to the insurer’s or servicing agent’s internal routing or delivery procedures.
(B) If the procedure required pursuant to subparagraph (A) is not maintained, it shall be conclusively presumed that a request was received on the earliest of the following:
(i) The delivery date shown on an express, certified, or registered mail receipt form of the United States Postal Service or by a commercial carrier.
(ii) Two business days after the request was postmarked by the United States Postal Service.
(iii) One business day before the date stamped received by the insurer or servicing agent.
(C) For purposes of this paragraph, “business day” has the meaning set forth in subdivision (b) of Section 1215.
(D) Postmarks generated by postage meters not located at an office of the United States Postal Service are to be disregarded.
(f) (1) This section does not alter a contractual provision governing calculation of cash or surrender or other values, unless that contractual provision applies a valuation date other than the effective date of surrender described in subdivision (b) to the calculation of cash or surrender or other values.
(2) The effective date established by subdivision (b) is intended to establish a date certain on which a contract owner may rely in determining when the 45-day period specified in subdivision (a) begins to run and a date certain for the insurer to use for the valuation of the contract.
(3) Notwithstanding paragraph (3) of subdivision (b), an insurer may request information that is reasonably necessary to process the surrender in addition to that listed in subdivision (b). An insurer’s request for additional information does not delay an effective date established by a contract owner’s compliance with subdivision (b).
(4) An insurer may request a signature guarantee if there is reason to believe a fraudulent situation may occur.
(g) This section shall only apply to contracts issued on or after January 1, 2019.

SEC. 16.Section 10202 of the Insurance Code is amended to read:
10202.

Life insurance conforming to all the following conditions is one form of group life insurance:

(a)Written under a policy covering when issued not less than two public or private employees.

(b)Written under a policy issued to the employer, the premium on which is to be paid by the employer, by the employee, or by the employer and employees jointly, and insuring either all of the employees or all of any class or classes thereof, determined by conditions pertaining to the employment.

(c)For amounts of insurance based upon some plan which will preclude individual selection.

(d)For the benefit of persons other than the employer. That group insurance may be for the benefit of a trustee of a pension, welfare benefit plan, or trust established by an employer providing life, health, disability, retirement, or similar benefits to employees of the employer or its affiliates, and acting in a fiduciary capacity with respect to those employees, retired employees, or their dependents or beneficiaries, where the trustee has an insurable interest in the lives of the employees for whom those benefits are to be provided and where the employee has consented in writing to the coverage.

(e)When the premium is to be paid by the employer and employee jointly and the benefits of the policy are offered to all eligible employees.

(f)Terminating if, subsequent to issue, (1) the number of employees insured falls below two lives, and (2) the employee contributions, if the premiums for the insurance are on a renewable term insurance basis, exceed one dollar ($1) per month per one thousand dollars ($1,000) of insurance coverage plus an amount equal to any additional premium per one thousand dollars ($1,000) of insurance coverage charged to cover one or more hazardous occupations.

(g)The application period and the notice requirements shall be the same for classes of former employees and retired employees as those set forth in paragraphs (2) and (4) of subdivision (a) of, and subdivision (b) of, Section 10209.

That insurance may be issued either with or without medical examinations.

SEC. 17.Section 10202.5 of the Insurance Code is amended to read:
10202.5.

(a)The term “employees” as used in Section 10202 may include the officers, managers, and employees of subsidiary or affiliated corporations, and the individual proprietors, partners, and employees of affiliated individuals and firms, when the business of such subsidiary or affiliated corporations, firms or individuals is controlled by the policyholder through stock ownership, contract or otherwise, or when the policyholder is controlled by affiliated corporations, firms or individuals through stock ownership, contract or otherwise. The policy may provide that the term “employees” as used in Section 10202 may include classes of former employees, including retired employees, and may also include the individual proprietors or partners who constitute the policyholder, but limited to such individual proprietors and partners who are actively engaged in the business the employees of which are covered by the group insurance.

(b)Nothing contained herein shall permit any person other than an officer, manager, or employee for compensation, or classes of former employees, including retired employees, of the policyholder or of one or more of the individuals, firms, or corporations or of the individual proprietors or partners specified in subdivision (a) to become insured under a group policy.

SEC. 18.Section 10202.8 of the Insurance Code is amended to read:
10202.8.

A group life policy conforming to all the following conditions may be issued to the trustees of a fund established by employer members of a trade association, or by a trade association maintained by contributions of such members for the sole benefit of their employees or, by one employer, or by two or more employers in the same industry, or by an association of employers in the same industry, or by one or more labor unions, or by one or more employers and one or more labor unions, or by an association of employers and one or more labor unions, to insure employees of the employers or members of the unions for the benefit of persons other than the employers or the unions:

(a)The persons eligible for insurance shall be all of the employees of the employers or all of the members of the unions, or all of any class or classes thereof determined by conditions pertaining to their employment, or to membership in the unions, or to both. The policy may provide that the term “employees” may include classes of former employees, including retired employees, and the individual proprietor or partners if any employer is an individual proprietor or a partnership. No director of a corporate employer shall be eligible for insurance under the policy unless such person is otherwise eligible as a bona fide employee of the corporation by performing services other than the usual duties of a director. No individual proprietor or partner shall be eligible for insurance under the policy unless he is actively engaged in and devotes a substantial part of his time to the conduct of the business of the proprietor or partnership. The policy may provide that the term “employees” shall include the trustees or their employees, or both, if their duties are principally connected with such trusteeship.

(b)The premium for the policy shall be paid by the trustees either: (a) wholly from funds contributed by the employer or employers of the insured persons, or by the union or unions, or by both; or (b) partly from such funds and partly from funds contributed by either all of the insured persons or by one or more classes thereof, or (c) wholly derived funds contributed by the insured persons.

(c)The policy must cover at the date of issue at least 50 persons.

(d)The amounts of insurance under the policy must be based upon some plan precluding individual selection by the insured persons or by the trustees, employers or unions.

That insurance shall be issued with or without medical examination. For the purpose of this section the word “industry” shall include licensed professions, such as medicine, dentistry, pharmacy, law, and accountancy.

SEC. 19.SEC. 15.

 Section 10270 of the Insurance Code is amended to read:

10270.
 (a) This chapter shall not apply to workers’ compensation insurance, any policy of liability insurance with or without supplementary coverage, or any policy or contract of reinsurance.
(b) This chapter shall apply to selected group disability insurance as defined in Section 10270.97, except insofar as it is exempted from Section 10401.
(c) This chapter shall apply to each of the types of insurance enumerated in this subdivision that insure more than one person, except to the extent that the type of insurance may be exempted from compliance with particular portions of this chapter by the provisions of this chapter relating to that type of insurance.
The types of insurance that insure more than one person and that are hereby exempted from subdivision (c) of Section 10320 (but family expense disability insurance only to the extent therein provided), and Section 10401 (but only to the extent in this chapter provided) are:
(1) Blanket insurance, as defined in subdivision (a) of Section 10270.2.
(2) Tuition refund insurance, as defined in Section 10270.1.
(3) Group disability insurance, as defined in Sections 10270.5, 10270.505, and 10270.57.
(4) Family expense disability insurance, as defined in Section 10270.7.
(5) Unemployment compensation disability insurance, as defined in paragraph (6) of subdivision (a) of Section 10270.2.

SEC. 20.SEC. 16.

 Section 10270.6 of the Insurance Code is amended to read:

10270.6.
 Every group disability master policy shall contain the following provisions:
(a) A provision that the policy, the application of the policyholder, and the individual applications, if any, of the individuals insured shall constitute the entire contract between the parties, and that all statements made by the policyholder, or by the individuals insured shall, in the absence of fraud, be deemed representations and not warranties, and that no such statement shall be used in defense to a claim under the policy, unless it is contained in a written application;
(b) A provision that the insurer will issue to the policyholder for delivery to the individuals insured under such policy, an individual certificate setting forth a statement as to the insurance protection to which he or she is entitled and to whom payable;
(c) A provision that to the group or class thereof originally insured shall be added from time to time all new employees, members, or pupils of the policyholder eligible to and applying for insurance in such group or class;
(d) A statement that such policy is not in lieu of and does not affect any requirement for coverage by workers’ compensation insurance.

SEC. 21.SEC. 17.

 Section 11401 of the Insurance Code is amended to read:

11401.
 (a) An association shall not operate or do business in this state without a certificate of authority. The commissioner shall issue a certificate of authority to any association unless he or she determines, after examination, that it does not comply with the provisions of this chapter. The filing fee for the application for the certificate of authority shall be one thousand four hundred ten dollars ($1,410).
(b) (1) On or before July 1, 2019, every association shall renew its certificate of authority.
(2)  After July 1, 2019, an association shall renew its certificate of authority every five years from the date it previously renewed its certificate of authority.
(c) (1) The commissioner may revoke the certificate of authority for an association that failed to renew its certificate of authority in compliance with subdivision (b), after giving reasonable written notice mailed to the last address of the association registered with the department.
(2) The commissioner may revoke the certificate of authority for an association that has a dissolved, suspended, or otherwise inactive status according to the records of the Secretary of State, after giving reasonable written notice mailed to the last address of the association registered with the department.
(3) To obtain a reissue of a certificate of authority revoked pursuant to this subdivision, an association shall apply to the commissioner pursuant to subdivision (a).

SEC. 22.SEC. 18.

 Section 12147 of the Insurance Code is repealed.